cash balance plan + SEP IRA
I have a client who maxes his employee contributions to the 401k for his W2 job. He also receives 1099 income from an unrelated employer and from that he makes an annual contribution for a cash balance plan that we set up for him 2 years ago. He has a one person corporation set up for that 1099 work and we’d previously established and funded a SEP IRA before we started doing the cash balance plan. The question is now coming up of how much of a contribution he can make to his SEP IRA while he continues to contribute yearly to the cash balance plan.
Permalink Submitted by Alan - IRA critic on Fri, 2024-08-09 19:31
This question is out of my area of expertise, and can be quite complex. However, it appears that a SEP IRA is allowable with a cash balance plan (i.e. a DB plan) as long as the SEP is not a model 5305 SEP. A prototype SEP from perhaps Schwab or Morgan Stanley would be needed. I think the contribution limits are separate, but might be affected by whether the CB plan is covered by the PBGC or not.